A budget is a tool that will help you make critical spending decisions.

A good budget can help keep spending on track and uncover hidden cash flow problems that might free up more money.

Freeing up additional money can help move an individual closer to achieving other goals.

Freeing up money can help a survivor minimize financial strain and pay down debt.

Debt is common in the United States, and there are many resources to help you manage it.

43 44Budgeting and Saving

Complete the following steps to create a personalized budget

Step 1 Identify your net monthly income

This is the money that comes into your household, after deducting taxes, Social Security insurance, etc.

Step 2 Identify your monthly expenses

Monthly expenses include rent and phone bills, as well as those that occur periodically, like car insurance and medical expenses.

Step 3 Subtract your monthly expenses from your income

The difference between your income and expenses indicates whether or not you have any money to spare. Can you reduce expenses or earn more money to cover shortages?

45Budgeting and SavingBelow is the first half of a budgeting worksheet to review. 46Budgeting and SavingBelow is the second half of a budgeting worksheet to review. 47Budgeting and Saving

What is the correlation between financial goals and emotions?

For many of us, emotions and money are closely tied to spending

After a divorce or separation, many women finally feel free since their partner typically controlled all the spending

Woman often feel like they deserve to buy new things and enjoy their new freedom after leaving an abusive relationship

Shopping can become an outlet or avenue for relief

48Budgeting and SavingWhat are ways to treat yourself without breaking the bank? 49Budgeting and Saving

Why is saving money so important?

A goal for an emergency fund should be to have enough money to pay three months of living expenses.

Its important to put money away consistently.

Its better to save 10 every month than to save 25 only occasionally. Put money aside by making a deposit to your account as though you were paying a monthly bill.

The secret to saving money is the miracle of compound interest.

Example, if a 20-year-old makes a one-time 5,000 contribution to her retirement account with eight percent return, it will grow to 160,000 by the time she retires at age 65.

But if she waits until shes 39, that 5,000 would only grow to 40,000.

50Budgeting and Saving

Below is a summary of the typical types of savings accounts

Interest-Earning Savings Accounts Youll earn about two percent interest on your savings and receive a monthly statement in the mail. Funds can be withdrawn at any time.

Money Market Accounts These pay about one-half percent higher interest than savings accounts, but may require a higher minimum balance. You can usually make as many deposits as you like for free, but you can only write three checks each month.

Certificates of Deposit If you have money that can be tied up for three months to six years, certificates of deposit will offer the highest interest rates, depending on the term you choose. There are stiff penalties for early withdrawals, so choose a term you can live with.

Can you find out what information is required before a pension plan will pay benefits directly to the survivor?

53Assets and Liabilities

If you have the time, research the following

Are there antiques, tools, artwork or collections whose value could be underestimated?

Is there income that has not been reported on tax returns or financial statements?

Are there any certificates of deposit?

Is there a business?

54Assets and Liabilities

First research your personal debts and personal liabilities.

Make a list of your outstanding debts.

Figure out how much you owe. Include educational loans, home improvement loans, checking-account overdrafts, personal loans, rent-to-own agreements and other installment purchases.

Prioritize and decide which debts to pay first.

Sort your list by interest rate, putting the account with the highest interest rate at the top.

Find credit cards and loans with the lowest interest rate.

Lower interest rates are available for good customers, but you must request them. Ask your credit card company if they would consider lowering your rate.

55Assets and LiabilitiesBelow is a chart to help you manage and pay off debt 56Module Two Learning Financial Fundamentals Finance Management Budgeting and Saving Assets and Liabilities Banking Options 57Banking Options

Familiarize yourself with the various banking options

Banks

Banks are financial institutions that accept deposits and channel money into lending activities. Traditional banks serve the general public.

Credit Unions

Credit unions are community-based financial cooperatives that offer a wide- range of services and serve their members.

Payday Lenders Car Title Loans

Payday lenders provide small cash advances using a postdated personal check. Although the loans are short-term, the loan fees are nearly equal to a 400 percent annual percentage rate (APR).

Check Cashing Stores

Check cashing stores are small businesses that cash checks for a fee. In general the fee is four percent.

58Banking Options

Determine which banking option is best for your situation

Do you have the required minimum amount to open up an account at a bank or credit union?

If you want to open up your account at a credit union, do you know how to become a member?

Are the banks hours of operation and locations convenient with your schedule?

59Module Two Review Exercise

Think about what we have discussed during the past hour.

What do you believe was the most important piece of information you learned today?

What is one action item you will commit to doing to improve your current situation?

If you cannot access either, you can use your drivers license or state ID card to request a copy.

The most recent copy of your bank, investment or credit card statements.

If you cannot find paper copies of documents, request an electronic copy to be sent to a private e-mail account or pick it up in person.

Dont worry if you cant access your utility or other monthly expenses. Your most recent bank statement will provide information about monthly expenses (or if you pay via money orders, make copies of these statements).

93Housing Options

Consider the following before signing a lease

Do not put money down unless youre sure you want the unit.

Calculate the anticipated costs of utilities (i.e., heat, electricity) when determining whether you can afford an apartment.

Check the apartment to ensure that its in acceptable condition and put all agreements for repairs in writing.

94Housing Options

More items to consider the following before signing a lease

Evaluate how the superintendent or landlord responds to emergencies.

Talk with prospective neighbors about the landlord.

Visit the property at night and during the weekend to become more familiar with the community.

An unsecured loan is a loan obtained without collateral (such as a house or car). This loan is also called a signature loan. There are three main types of unsecured loans

I Owe You (I.O.U.) Loan

Credit Card Loan

Personal Loan

97Loan Options

What is an secured loan?

Secured loans are those loans that are protected by an asset or collateral of some sort (such as a car or house). From a lenders point of view, these types of loans are less of a risk because the lender can recover their loss by re-possessing the asset used for the loan.

Debt Consolidation Loan

Car Loan

Mortgage Loan

98Loan Options

Before you buy a car, consider the following

The primary difference between loans for new and used cars is that new care loans tend to come at a lower interest rate.

You should be very careful when shopping for a car loan to ensure that they get the best loan for their needs.

Visit www.edmonds.com to determine how much of a car loan you can afford.

As a general rule, loans with short terms are better because borrowers pay less interest, and the lower the interest rate, the less costly the used car financing. However, the monthly payment will be higher.

Prepayment penalties are monetary penalties that occur when a borrower paysoff a loan earlier than was originally agreed.

Negative Amortization (Neg Am) may be appealing to first-time buyers who cant afford huge upfront mortgage payments, however may result in unmanageable monthly payments in the end.

Predatory lending is the practice of using unfair, deceptive, and abusive tactics in lending money.

Payday loans or car title loans are short-term loans that are offered to individuals without regard to credit. Though these loans are relatively easy to obtain, they are granted at unreasonably high interest rates.

Cash and Asset Reserves Lenders may request information about your cash available (checking and savings).

103Loan Application Process

The following is good to know before applying for a mortgage

Loan prequalification is a process that pre-approves a homebuyer for a specific loan amount when purchase a home. It helps you look for homes you can afford and gives you a competitive advantage.

The mortgage application not only asks for information about you but also requires information about the property (since it will be used as collateral). The property information can be found in the appraisal.

An emergency savings fund should have enough money to pay three to six months of living expenses such as repairs on a car or leaky roof.

Its important to put money away consistently.

Its better to save 10 every month than to save 25 only occasionally. Put money aside by making a deposit to your account as though you were paying a monthly bill.

The secret to saving money is the miracle of compound interest.

Example, if a 20-year-old makes a one-time 5,000 contribution to her retirement account with eight percent return, it will grow to 160,000 by the time she retires at age 65.

But if she waits until shes 39, that 5,000 would only grow to 40,000.

115Savings Strategies

How do I make compounding work for me?

Start early. The younger you start, the more time compounding can work in your favor. If you didnt start early, dont despair, there is still time. Put away as much as you possibly can. Federal regulations allow older workers to put more money into retirement plans.

Make regular investments. Remain disciplined and make saving for retirement a priority. Do whatever it takes to maximize your contributions. If you work for a company that provides a match, make sure that you enroll to equal the highest match from the company.

Be patient. Do not touch the money. Compounding only works if you allow your investment to grow. The results will seem slow at first, but persevere. Most of the magic of compounding comes at the very end of the investment.

116Savings Strategies

Below is a summary of the typical types of savings accounts.

Interest-Earning Savings Accounts Youll earn a small percentage of interest on your savings and receive a monthly statement in the mail. Funds can be withdrawn at any time.

Money Market Accounts These pay about one-half percent higher interest than savings accounts, but may require a higher minimum balance. You can usually make as many deposits as you like for free, but you can only write three checks each month.

Certificates of Deposit If you have money that can be tied up for three months to six years, certificates of deposit will offer the highest interest rates, depending on the term you choose. There are stiff penalties for early withdrawals, so choose a term you can live with.

The point is that it doesn't matter which method you choose for investing your money, the goal is always to put your money to work so it earns you an additional profit.

119Investment Options

The following are ways to save for your retirement.

Individual Retirement Accounts (IRAs) are retirement savings accounts that provide tax advantages when you save for retirement. There are different types of IRAs, some provided by employers and others are set up by individuals.

Pensions are retirement plans set up by employers to provide benefits to retired employees.

401(k) Plans are retirement plans that defer income taxes on retirement savings and any interest they may earn until withdrawn. Most plans are sponsored by employers.

120Investment Options

To plan for your retirement needs, consider these questions

How long will your retirement last? When do you plan to stop working? Will you retire early or are you planning to work at least part-time as long as you can? How long are you likely to live?

How much will a dollar be worth? During times of inflation or rising prices, youll need more income to support your current lifestyle. When calculating how much money youll need for retirement, assume inflation rates of three to four percent.

How much will you spend? What type of retirement do you envision? Do you plan to stay in your current home? Do you plan to retire to a beach community in Florida? The first lifestyle will probably cost less than the second.

PowerShow.com is a leading presentation/slideshow sharing website. Whether your application is business, how-to, education, medicine, school, church, sales, marketing, online training or just for fun, PowerShow.com is a great resource. And, best of all, most of its cool features are free and easy to use.

You can use PowerShow.com to find and download example online PowerPoint ppt presentations on just about any topic you can imagine so you can learn how to improve your own slides and
presentations for free. Or use it to find and download high-quality how-to PowerPoint ppt presentations with illustrated or animated slides that will teach you how to do something new, also for free. Or use it to upload your own PowerPoint slides so you can share them with your teachers, class, students, bosses, employees, customers, potential investors or the world. Or use it to create really cool photo slideshows - with 2D and 3D transitions, animation, and your choice of music - that you can share with your Facebook friends or Google+ circles. That's all free as well!

For a small fee you can get the industry's best online privacy or publicly promote your presentations and slide shows with top rankings. But aside from that it's free. We'll even convert your presentations and slide shows into the universal Flash format with all their original multimedia glory, including animation, 2D and 3D transition effects, embedded music or other audio, or even video embedded in slides. All for free. Most of the presentations and slideshows on PowerShow.com are free to view, many are even free to download. (You can choose whether to allow people to download your original PowerPoint presentations and photo slideshows for a fee or free or not at all.) Check out PowerShow.com today - for FREE. There is truly something for everyone!

presentations for free. Or use it to find and download high-quality how-to PowerPoint ppt presentations with illustrated or animated slides that will teach you how to do something new, also for free. Or use it to upload your own PowerPoint slides so you can share them with your teachers, class, students, bosses, employees, customers, potential investors or the world. Or use it to create really cool photo slideshows - with 2D and 3D transitions, animation, and your choice of music - that you can share with your Facebook friends or Google+ circles. That's all free as well!

For a small fee you can get the industry's best online privacy or publicly promote your presentations and slide shows with top rankings. But aside from that it's free. We'll even convert your presentations and slide shows into the universal Flash format with all their original multimedia glory, including animation, 2D and 3D transition effects, embedded music or other audio, or even video embedded in slides. All for free. Most of the presentations and slideshows on PowerShow.com are free to view, many are even free to download. (You can choose whether to allow people to download your original PowerPoint presentations and photo slideshows for a fee or free or not at all.) Check out PowerShow.com today - for FREE. There is truly something for everyone!